March 2011

BBC Strategic Review
Candidate; 668850,

Executive Summary

The BBC operates in a market where competitors are continuously striving to increase their revenue and market share. It is essential that within this current climate, the organisation adapts their strategies to the internal and external demands of the constantly changing environment to secure their financial position for the future.
This report has been designed to provide an in depth strategic analysis of the internal and external environments the BBC operates in. Our internal analysis has demonstrated that BBC has high levels of turnover but the gearing level has also been rising. To counteract this it has been recommended that the BBC can exploit their resources and implement a short term strategy to increase their services by publishing adverts, expanding the BBC iPlayer internationally and introducing pay per view services to create additional revenue streams to combat the stagnated and threatened licence fee and government grants.
The external analysis has indicated that technology has been rapidly changing and competitive rivalry is an issue within this industry therefore a long term opportunity has been recommended for the BBC, to penetrate into BRIC and other international markets to promote their brand and take advantage of the huge growth potential in these markets whilst creating larger profits to be reinvested in quality, their people and technological advancement.

Contents 1. Introduction 5
1.1 Report objectives 5
1.2 Company Overview 5 2 Analysis 6
2.1 External Analysis 6 2.1.1 Macro-Environment PEST 6 2.1.2 Industry Analysis 7 2.1.3 Porter’s Competitive Forces 8 2.1.4 Intra-industry Analysis- Strategic Groups 9
2.2 Internal Analysis 10 2.2.1 Strategic Business Units 10 2.2.2 Resource Based View 11 2.2.3 Competences and Competitive Advantages 11 2.2.4 Value Chain Analysis 13 2.2.5 Financial Analysis 14
2.3 SWOT Analysis 16 3 The BBC’s Strategic Direction 17
3.1 Organisational Mission 17
3.2 Organisational Vision 17
3.3 Organisational Values 17
3.4 Strategic Objectives 17 4 Scenario Planning 18
4.1 Setting the Scene 18
4.2 Factors of Uncertainty 18
4.3 Key Factors 19
4.4 Development of Scenarios 19 5 Scenario Analysis 20
5.1 Resources 20
5.2 Future Porter’s Competitive Forces 21
5.3 Future SWOT 21 6 Potential Strategy Formulation 22
6.1 TOWS Matrix 22
6.2 Ansoff’s Matrix 23 6.3 Expansion Method Matrix 24
6.4 Strategic Choice Process 25 6.4.1 FSA Matrix 25 6.4.2 FSA Matrix per Scenario 25
6.5 Feasibility, Suitability, Acceptability 26 7 Chosen Strategies 28
7.1 Chosen Strategies 28
7.2 Justifications 28 8 Implementation 29
8.1 Strategy 1 29 8.1.1 Gantt Chart 29 8.1.2 Risk Analysis 30 8.1.3 HR & Finance Implications 31
8.2 Strategy 2 32 8.2.1 Gantt Chart 32 8.2.2 Risk Analysis 33 8.2.3 HR & Finance Implications 34
8.3 Stakeholder Mapping 35
8.4 Managing the Change 36 9 Strategy Monitoring 42
9.1 Balanced scorecard 42 10 Conclusion 43 11 References 44

1. Introduction
1.1 Report objectives

The objective of this report is to analyse the BBC and its environment- looking at the current strategies to then make a proposal of strategic options for developing BBC’s overall strategic position and improving its performance.
The report will recommend strategies for the BBC to implement as well as recommending how to manage the change to ensure successful strategic implementation.

1.2 Company Overview

The BBC is the principal state-owned public service broadcaster in the United Kingdom, headquartered in the City of Westminster, London. Their main responsibility is to provide public service broadcasting in the United Kingdom, which meets the objectives set out in the Royal Charter. Within the UK work is funded principally by an annual television license fee, which is paid by all UK households, companies and organisations recording or receiving live television broadcasts. The level of the fee is set annually by the British Government and agreed by Parliament.

The Corporation's 'guaranteed' income from the license fee and the World Service grants are supplemented by profits from commercial operations through a wholly owned subsidiary, BBC Worldwide. The company's activities include programme sales, magazines including Radio Times and book publishing. The BBC also earns additional income from selling certain programme-making services through BBC Studios.

The BBC Trust was formed on 1 January 2007, replacing the Board of Governors as the governing body of the Corporation. The Trust sets the strategy for the corporation, assesses the performance of the BBC Executive Board in delivering the BBC's services, and appoints the Director-General.

2 Analysis
2.1 External Analysis
2.1.1 Macro-Environment PEST

2.1.2 Industry Analysis

The Television industry is key to the BBC’s operations.
Growth
Decline
Introduction
Maturity

The global TV market is still in a state of growth; * Revenue in recent years has grown from £173bn in 2006 to £194bn in 2008. * Revenue per head (RPH) of the emerging markets of BRIC are rapidly growing, e.g. Brazil had a RPH of £17 in 2003 which has expanded to £37 in 2008. * The reason that the TV industry is still in the growth stage is the rapid innovation of technology; HD TV and 3D TV are pushing to make the experience even more enjoyable for viewers and as such progress is still key in this industry. * Majority of countries have over 97% of their households owning a TV, with India being the major exception with only 58% in 2008. * The UK television industry generated £11.1bn of revenue in 2009, a fall of £49m (-0.4%) on 2008, as growing subscription revenues were offset by a declining advertising market.

The Radio Industry is in the maturity stage, heading towards a decline; * Total UK radio industry income stood at £1.1bn in 2009, down by 4.0% on 2008 * UK radio advertising expenditure fell from £474m in 2007 to £365m in 2009 * Radio does not have the same innovation as TV, DAB not taking off and less user interaction

The above shows that the BBC has services in maturing markets; this means they must take advantage of regions in which they see growth to continue performing and they must innovate to create products or services that in earlier stages of their product life cycle within these industries.

2.1.3 Porter’s Competitive Forces

Force | Strength | Threat of New Entrants * Capital requirements are large due to purchasing/hiring studios/specialist equipment * The BBC has a strong brand image & a government charter & are neutral and not biased * The BBC have many studios, equipment and business relationships making economies of scale high which is a deterrent, cost wise to new entrants. * There are no switching costs associated within the BBC’s industries, other than the Sky/Virgin subscription in TV, as such this is a benefit for the new entrant. * New competitors need to meet OFCOM requirements/licence & legalities. * The Analogue to Digital switch will produce more access to distribution channels as the broadcast frequency blocks will now be able to carry more than one station in each. The internet is already an unrestrictive distribution channel. | LOW/MEDIUM | Threat of Substitutes * Many specialised channels produce one aspect of what the BBC offer (Sports, news, etc). * The BBC have special rights to certain events, such as the World Cup and Olympics, that only one or even no other channels can show/cover. * BBC radio have 6 music, playing very alternative music and the Asian networks that differentiates from other radio stations. * There are many substitutes for each service; TV, radio, Internet, Film industry, Books * Promotion of outdoor activities and exercise may reduce the hours of use of BBC products. | HIGH | Supplier Power * High supplier concentration for equipment & vehicles – making it competitive, BBC own their own studios (e.g. Elstree)-no supplier. * Low switching costs to other suppliers, no superior brand name, although the BBC is likely to have good relationships with certain suppliers. * The BBC produces the majority of their own shows and as such are not reliant on freelance programme makers/suppliers. * Large orders and established network so good bargaining power. * Unlikely that the suppliers enter into forward integration. | LOW | Customer Power * Customers have a large variety of service providers to choose from – there are many alternative TV channels, Radio stations and internet sites * Customer loyalty is very low. * No price bargaining potential of buyer – mandatory TV licence fee. * There are lots of undifferentiated products on offer-genre wise, but the BBC produce services with public purposes in mind - quite unique perhaps lessening the alternatives | LOW/MEDIUM | Competitive Rivalry * Competitors: ITV, Channel 4, dedicated sports, music, news channels, radio stations (Kiss, Capital), internet (Times online, CNN). * The market is saturated; there are many service providers * BBC’s Competitive advantages; (1) Government links (2) Public purposes link them to the public and their needs (3) Brilliant news network & unbiased respected reporting (4) Very strong brand name | HIGH |

2.1.4 Intra-industry Analysis- Strategic Groups

Geographical Scope
High
Low
Narrow
Broad
Product Range

Walt Disney is the largest media conglomerate in the world this strategic group has a huge range of products from movies, television channels, radio to theme parks and toys. At the other end of the scale channel 5 are only located in the UK and do not have regional channels, their product range is mainly TV broadcast, this strategic group is the smaller television broadcasters.
The BBC sit in the middle with competitors such as Sky and Virgin who have a diversified geographical scope and offer a wide range of products and services but not on the same level as the largest media conglomerates.

2.2 Internal Analysis
2.2.1 Strategic Business Units

Breakdown of BBC Spend | £m 09/10 | % 09/10 | Television | 2,351 | 66 | Radio | 604 | 17 | Online | 199 | 6 | Other | 406 | 11 | Total | 3,560 | 100 |

SBU Platform | | Application | | Key Points | | Broadcasting | Catch-up/Anytime | Products/ Sales | | TV | | | | * Diverse program choice * Niche genre with purpose * Strong customer base * Investment in UK TV production | Radio | | | | * Support up & coming artists * Support niche audiences – Asian network & 6Music * Diverse range of stations | Online | | | | * On demand fits lifestyles * Website provides learning for children | Commercial | | | | * Highly profitable > £1bn 09/10 revenues * International investment in world wide productions * Gives BBC a world wide foundation | News | | | | * Strong unbiased reputation * Worldwide access & locations * National, regional and International affairs |

2.2.2 Resource Based View

Resource level | Type of Resource | Description | Core/Breakthrough | Intellectual Property | Copyrights, Patents, programmes, iPlayer, BBC Worldwide | Core | Reputational Assets | Brand name and public trust, public promises | Base | Physical Assets | Offices, Vehicles, Studios, Technical equipment | Base | Financial Assets | Government grants, licence fee, minority interests | Base | Human Resources | Executive board, actors, news correspondents, presenters, technical staff, office workers | Peripheral | Various | Staff training, equipment maintenance, suppliers |
2.2.3 Competences and Competitive Advantages

Competence level | Type of Resource | Description | Core | Intellectual Property | Editing, distribution, advertising, content controls | Core | Reputational Assets | Unbiased, professional behaviour, supporting community | Strategic capability | Physical Assets | Technical training, studio maintenance, supplier relations | Threshold | Financial Assets | Budgets & Financial planning, co-operation with Gov. | Threshold | Human Resources | Training courses, recruitment process, salary benchmarking |

Competitive advantages | Sustainable competitive advantages | Global geographical coverage – culturally aware | Income stream with little change in demand, low level of price elasticity | Bilingual employees | Unbiased reputation world wide of news coverage | Creative programming, often produced by BBC themselves | Close links to the UK Government, including government grants | Breakthroughs in technology e.g. iPlayer | Social responsibility reputation | Educational benefit to children due to public purposes | |

Inside-out perspective- this is resource based and comes from the BBC’s core competences, such as their editing/programme making skills, Staff training in the news sector to be unbiased and content controls for the same purpose etc

VRIO Framework
Sustainable competitive advantage & capabilities/Resources Resource | Valuable? | Rare? | Non-Imitate? | Exploited by Organisation? | Competitive implications | Government links | Yes | Yes | Yes | Yes | Sustained advantage | TV Licence income | Yes | Yes | Yes | Yes | Sustained advantage | Unbiased reputation | Yes | Yes | Yes/Maybe | Yes | Sustained/Temp advantage | Technology | Yes | No | No | Yes | Parity/Temp | Creative programming | Yes | Yes | No | Yes | Temp advantage | Bilingual employees | Yes | Slightly | No | Yes | Parity/Temp | Public purposes | Yes | Yes | No | Yes | Parity |

Firm Infrastructure: Content/quality control, formal planning alongside government, financing, information management (ensuring unbiased journalism) | HR Management: Training technical staff, producer/editor training, customer service staff, management of misdemeanours (Jonathan Ross) | Technology development: iPlayer development, online gaming/education, shows in HD, radio DAB quality, preparation for Digital switchover, 3D TV | Procurement: Purchase of cameras and equipment/vehicles, purchasing studios and sets, marketing & financial corporate services | Purchase of freelance programmes, actors & Presenters contracts, scheduling & distribution, programme production | Programme testing /content control, editing, BBC advertising, recording & adding commentary, adding interactive functions | Broadcasting, customer interaction, posting online content, distribution of products to distributors (Books etc) | Sales to commercial buyers & programmes to countries, advertisement of other BBC services and trailers, schedules in newspapers | On demand viewing of aired shows, iPlayer, customer complaints & feedback, |
2.2.4 Value Chain Analysis

The activities of the BBC that have been analysed show the efficient processes and importance of each activity to the value that consumers place on the BBC.
The key activities that stand out as adding value are the selection and production of programmes and Radio Shows – as these are the key input to the final product that consumers see/hear and the content control that ensures it is appropriate for viewing and that it adds the benefit that it should in meeting the public purposes.

2.2.5 Financial Analysis

BBC’s financial position will be analysed in order to highlight any opportunities that may be available to them after taking into consideration the current debt they have.

Turnover & Net Profit

BBC’s main source of income is the mandatory license fee. Turnover and net profit has been increasing over the last three years even whilst being in the financial crisis. The turnover for the year ending 2009/2010 was £4790.4 million and net profit was £477.6 million.

Current Ratio

The above graph indicates that BBC is capable of paying short-term liabilities with its short term assets as the current ratio has been above 1 for the previous three years. The ratio decreased slightly in 2010 to 1.40.

Gearing

The BBC has a high gearing level of 124% which suggests they have high levels of long-term liabilities. This indicates that investment from other sources may not be available and government intervention is required.

Return on Capital Employed

As shown, BBC’s ROCE has been increasing, but is lower than Sky over the last three years suggesting the organisation does not make as much return on profit and attract investment as Sky does.
The above analysis demonstrates that BBC has high levels of turnover and profit, although the organisation has a high gearing level. Additionally, the return made on investments is lower than competitors.

2.3 SWOT Analysis

3 The BBC’s Strategic Direction
3.1 Organisational Mission
The current BBC mission statement outlines perfectly the purpose of the BBC and its aims; as such we see no reason for amendment;
“To enrich people's lives with programmes and services that inform, educate and entertain.”
3.2 Organisational Vision
The BBC’s current vision is; “To be the most creative organisation in the world”. Due to our analysis we feel this is not clear nor truly representative of the BBC. Below is the new proposed vision that we believe is synonymous with this organisation.
“To be the premier organisation, globally, in terms of internally created quality and value which benefits our customers and meets their needs, through media services.”
This vision focuses more on the internally generated quality from the strong value chain and the importance of the consumer/end user’s welfare and needs which is so key to the BBC.
3.3 Organisational Values
The BBC has in place strong values alongside their public purposes. These allow the BBC to implement the same level of quality and focus in all that they do. We believe these values are evident in the BBC as an organisation and believe they should remain an integral part of decision making:
• Trust is the foundation of the BBC: we are independent, impartial and honest.
• Audiences are at the heart of everything we do.
• We take pride in delivering quality and value for money.
• Creativity is the lifeblood of our organisation.
• We respect each other and celebrate our diversity so that everyone can give their best.
• We are one BBC: great things happen when we work together.

3.4 Strategic Objectives
Having taken into account the analysis of the BBC and considering its future ability to continue being at the forefront of news reporting, publicly focused programmes and technological development we have chosen the strategic objectives below; * To develop into a renowned global organisation, widening the customer base, whilst not abandoning the UK customers and the country’s values. * Become more efficient- making the licence fee work harder * To produce additional revenue streams to allow increasing investment in our people, technology and research, allowing us to innovate and lead in terms of quality * Focus on increasing quality and the importance of the objective of everything we do * Connect the world’s cultures globally through a medium of understanding and knowledge
4 Scenario Planning
4.1 Setting the Scene

The existing strategies of the BBC are not very long term as they coincide with the Royal Charter agreement which is valid until 2016. The broadcasting environment where the BBC reside is heavily technological and as such changes in the sector are rather rapid e.g. HD and 3D platforms. Our planning horizon looks beyond this view, for the next decade until 2020.

4.2 Factors of Uncertainty

4.3 Key Factors
The top 12 factors of uncertainty in terms of level of uncertainty and importance are; 1. Government grant (amount and whether it still exists) 2. International Relations between UK and rest of the world 3. Rate of technological innovation 4. Work life balance 5. Existence and amount of TV licence fee 6. Future of Ofcom standards 7. Global and domestic inflation 8. Possible government integration; no longer privatised? 9. Fx rates leading to more foreign investment/more competition 10. TV per head in developing countries i.e. India 11. Global Europeanisation 12. Public’s perception of the BBC

4.4 Development of Scenarios

Scenario 1; Domestic government influences
The government has a strong impact upon factors that will have huge influence on the BBC, the uncertainty lies in their policy making and in the future environment where the economy is recovering from the financial crisis; cuts in budget, increasing inflation and likely rises in rates of corporation tax, individual income tax and interest rates will influence the BBC and its operations. The government grant is also likely to fall and an increasing TV licence fee will not be favourable with the public who may indeed question whether they should pay a licence fee if they forego the BBC channels in favour of the numerous channels shown on satellite. The future standards required by Ofcom are uncertain and could become more strenuous for the BBC.

Scenario 2; Positive globalisation and open markets
International relations between the UK and other countries is healthy and war is an uncommon occurrence making the markets and international trade more stable. There is an increase in global GDP and unemployment figures are decreasing. The globe is becoming more open to the European culture increasing demand especially in Asia, whilst due to the competitiveness of global trade the TVs per household figure is rising, especially in developing countries such as India. Foreign investment, linked to fx rates, may be increasing in the UK, leading to more competition or possible external investment in the BBC.

Scenario 3; Social perception of technology
There is a fast rate of technological innovation, an increase in advancement (live TV on mobiles?), yet reduction in price, of complementary products. There is more demand for online and virtual education for young children, yet the hours of technological interaction may stagnate or reduce due to the increasing incentives for society to undertake more outdoor activity and exercise, or even due to the work life balance that is apparent. The public’s perception of the BBC is strong and trust is evident in the corporation.

5 Scenario Analysis
5.1 Resources

The VRIN framework demonstrates what impact the BBC’s current resources and competitive advantage can have on the three future scenarios, shown through four factors; value, rarity, non-imitable and non-substitutable.

Resources | Domestic Government Influences | Positive Globalisation & Open Markets | Social Perception of Technology | | | | | | V | R | I | N | V | R | I | N | V | R | I | N | Brand name | B | G | G | N | G | B | G | G | G | G | G | N | Government grants | B | G | G | B | B | N | B | B | B | G | G | B | License fees | B | G | G | G | G | N | B | G | B | N | G | G | Public trust | B | G | G | G | G | G | G | G | N | G | G | G | BBC Worldwide | B | N | B | G | G | B | B | G | G | N | G | G | BBC IPlayer | N | G | G | G | G | B | B | G | G | N | G | B | BBC HD - CA | B | N | G | G | G | B | B | G | G | N | G | B | Corporate Social Responsibility -CA | B | G | G | B | G | B | B | G | G | N | G | G |

Key | G-Good | B-Bad | N-Neutral |

5.2 Future Porter’s Competitive Forces Porter’s Five forces | Current Time (2011) | Government Influence | Positive Globalization | Social Perception of Technology | Threat of new entrants | LOW | LOW | LOW | LOW | Threat of substitutes | HIGH | LOW | HIGH | HIGH | Power of buyers | LOW | HIGH | MEDIUM | HIGH | Power of suppliers | MEDIUM | LOW | LOW | LOW | Competitive rivalry | HIGH | LOW | HIGH | MEDIUM |

5.3 Future SWOT

6 Potential Strategy Formulation
6.1 TOWS Matrix | Weaknesses 1. Stagnated Income 2. Weak operating performance 3. Behind on technology 4. Saturated market segment | Strengths 1. Strong unbiased new segment 2. Brand name & public trust 3. Wide product portfolio 4. High skilled workforce 5. Strong value chain 6. Strong government links | Opportunities 1. Technological development such as 3D/HD 2. Removal of international barriers and expanding internationally 3. Additional income through adverts 4. BBC Trust is operationally independent | Strategic Options 1. Use of adverts as another source of income, will help overcome stagnated income 2. Removing international barriers to meet technological development 3. Using technological development such as live mobile TV and radio applications to combat saturated market segment 4. Removing international barriers to overcome bureaucratic organisation structure | Strategic Options 1. Use high-skilled workforce to take advantage of open market expertise & technology 2. Use of wide product portfolio such as advertising through websites, books, magazines, TV and radio to increase income 3. Use brand name to seek foreign investment 4. Expanding into open markets with the use of strong unbiased news segment 5. Wide product portfolio to expand internationally 6. Value added to fast technological development through value chain process | Threats 1. Competition 2. Reduced grants 3. Change in consumer taste 4. Slowdown in domestic & global economy | Strategic Options 1. Individual income & income from adverts to overcome reduced grants and reduced stagnated income 2. Additional investment in research and development to combat changes in consumer taste 3. Paper view TV to over reduced grants, weak operating profit and stagnated income 4. De-layering organisational structure to help weak operating profit 5. International technological development to overcome competition 6. Investment in technology to overcome competition | Strategic Options 1. Gain customer loyalty through brand name to overcome intense competition 2. Expanding wide product portfolio to meet customer needs and taste 3. Overcome reduced grants through strong internal value process 4. Mandatory license fee when slowdown in economy through strong government links 5. Strong value chain help adapt to consumer needs 6. Strong value chain and high-skilled workforce to enhance efficiency and encourage cost saving in slowdown of economy 7. Using high-skilled workforce to meet customer needs 8. Combat reduction in grants through existing brand name |
6.2 Ansoff’s Matrix
Product

M
A
R
K
E
T

Increasing/developing technological development
New
New
Present

Increase in brand name and image, customers, positive public perception

From the above table, we have selected certain strategic options from all four markets to carry out analysis of whether they are feasible, suitable and acceptable for the BBC. 7.3 Expansion Method Matrix

Strategic options and methods were developed below, per the expansion matrix, to determine any viable ways for the BBC to grow.

| Inside | Outside | Domestic | 1. More training on employees to cater to the taste of audience.2. Improve the quality of programs(wider range ,more choices)3. Additional stations/channels4. Produce a newspaper | 1. Purchase the broadcasting companies which are of high potential but not expensive right now.2. Joint venture with main competitors to share resources, expertise, R&D cost3. JV with educational institution to provide early learning to children | International | 1. Set more overseas offices in important cities worldwide to deal with international affairs more efficiently2. Improve the quality of programs internationally (more exports, more neutral, relevant to other cultures)3. Export iPlayer/BBC Radio to more countries | 1. Networks/alliance with foreign company to gauge cultures to allow BBC to meet international taste and needs using the BBC’s knowledge & information skills2. Licensing to show BBC owned programs outside the UK and increase the BBC’s brand internationally |

6.4 Strategic Choice Process
6.4.1 FSA Matrix Strategic Option | F | S | A | Score | Rank | 1. Penetration into Emerging Markets to take advantage of growth | 4 | 5 | 4 | 13 | 2 | 2. Diversification of product portfolio- providing newspapers/internet to households | 2 | 4 | 2 | 8 | 6 | 3. Using social networks as a platform for international expansion of services | 4 | 4 | 2 | 10 | 4 | 4. Promoting education through pre-school learning programmes and cooking lessons | 4 | 5 | 4 | 13 | 2 | 5. Focus on internal training and skill of work force to keep quality levels high | 5 | 4 | 3 | 12 | 3 | 6. International expansion and foreign investment | 3 | 5 | 5 | 13 | 2 | 7. Joint venture for efficiencies in resources, expertise and R&D | 2 | 4 | 3 | 9 | 5 | 8. Focus on cutting costs; overseas locations for cost efficiency & de-layering the organisational structure | 3 | 3 | 3 | 9 | 5 | 9. Expansion of revenue streams; adverts, pay per view, iPlayer to international markets through subscription | 5 | 5 | 5 | 15 | 1 | 10. Focused investment in R&D through Technological development | 3 | 5 | 4 | 12 | 3 |
Suitability: do the proposed actions address the threats and will they help deliver solutions?
Feasibility: Can the proposed actions be implemented considering the current resources of the BBC?
Acceptability: Do the outcomes of the strategy satisfy stakeholder expectations?
6.4.2 FSA Matrix per Scenario Strategic Option | Scenario 1 | Scenario 2 | Scenario 3 | Score | Rank | | F | S | A | F | S | A | F | S | A | | | 1. Penetration into Emerging Markets to take advantage of growth | 2 | 5 | 3 | 5 | 5 | 5 | 3 | 3 | 3 | 34 | 5 | 2. Diversification of product portfolio- providing newspapers/internet to households | 3 | 4 | 4 | 4 | 2 | 2 | 4 | 4 | 2 | 29 | 9 | 3. Using social networks as a platform for international expansion of services | 3 | 3 | 3 | 4 | 3 | 3 | 5 | 4 | 4 | 32 | 6 | 4. Promoting education through pre-school learning programmes and cooking lessons | 3 | 4 | 3 | 4 | 2 | 2 | 4 | 4 | 4 | 30 | 8 | 5. Focus on internal training and skill of work force to keep quality levels high | 5 | 4 | 3 | 4 | 4 | 4 | 4 | 5 | 4 | 37 | 3 | 6. International expansion and foreign investment | 3 | 5 | 3 | 5 | 5 | 5 | 3 | 5 | 4 | 38 | 2 | 7. Joint venture for efficiencies in resources, expertise and R&D | 4 | 4 | 2 | 4 | 2 | 2 | 4 | 5 | 4 | 31 | 7 | 8. Focus on cutting costs; overseas locations for cost efficiency & de-layering the organisational structure | 4 | 5 | 3 | 5 | 4 | 3 | 3 | 2 | 2 | 31 | 7 | 9. Expansion of revenue streams; adverts, pay per view, iPlayer to international markets through subscription | 4 | 5 | 4 | 5 | 5 | 5 | 4 | 4 | 4 | 40 | 1 | 10. Focused investment in R&D through Technological development | 3 | 3 | 3 | 4 | 4 | 4 | 4 | 5 | 5 | 35 | 4 |
6.5 Feasibility, Suitability, Acceptability

1. Additional revenue streams through expansion of services e.g. iPlayer, adverts and pay per view.
Suitability
As the BBC’s life cycle begins to fall into maturity, it would be suitable to implement this strategy as it would increase revenue and add value to shareholders as well as to customers within the domestic and international markets. The resources and competences will be recognised internationally, enhancing BBC’s reputation and brand image abroad and will also give rise to funding for technological development. Feasibility
In order for this strategy to be implemented, it requires certain resources and competences that the BBC have. The brand name, image and public perception of the organisation are current key resources the BBC have therefore redeploying these and making the iPlayer available internationally would be a good additional source of revenue. Additionally, bringing in adverts and pay per view TV within the domestic market as well as abroad, would be other potential revenue streams as BBC has the investment to do so thus making this strategic option feasible.

Acceptability
This strategic option has little risk as expanding internationally can only be another source of revenue as would airing adverts and pay per view TV. UK stakeholders would accept this idea as the potential returns made from the strategy would exceed the costs of implementation thus being cost-beneficial and another reason to why this strategy should be implemented.

2. Penetration into Emerging Markets and International Expansion
Feasibility
This strategy would be likely to require a substantial investment to push a wider range of services abroad and into the emerging markets. The contacts and distribution channels of BBC Worldwide could be utilised and expanded upon to help implement this strategy, perhaps being able to use existing contacts to find licensees. The initially large outlay is likely to be justified by the huge potential for growth and the ability to build upon the BBC’s core competency- its reputation and brand image.
Suitability
This strategy is designed to battle the imminent decline in government grants and stagnant revenue streams that the BBC faces. This expansion will allow the BBC to attain higher levels of revenue. The emerging markets, such as BRIC, should be of key focus as they are experiencing huge growth and the opportunities there are large, extending the industry life cycle. Having this wider outlook will help to solidify the BBC’s unbiased stance, allowing even better news reporting in the future due to the relationships built in these emerging markets.
Acceptability
The level of acceptability is high as this strategy meets key criteria; finding a solution to the diminishing growth in revenue streams, differentiating and expanding away from competitors such as Virgin and SKY, building upon the BBC’s strengths in its news segment, its reputation and the existence of BBC Worldwide. Benefits outweigh the large initial cost financially.

7 Chosen Strategies
7.1 Chosen Strategies
We plan to implement two strategies going forward; the first is the more short term of the two which will help to facilitate the funding of the second. 1. Additional revenue streams through expansion of services e.g. iPlayer, adverts and pay per view. 2. Penetration into Emerging Markets and International Expansion
7.2 Justifications
In order for the BBC to continue to compete in the fast paced markets they are currently in they must, have the funding and investment to be able to stay cutting edge and produce quality services. Thus, the initial strategy of seeking additional revenue streams through the expansion of services such as international subscriptions to the iPlayer content, airing adverts of other companies for fees and producing pay-per-view services such as business/politics related shows straight to smart phone, is intended to mediate the stagnated, and reducing, level of income from government grants and the frozen TV licence fee. This will allow the BBC to invest in their people and technology to meet the strategic objectives mentioned previously and sustain the values that they hold; such as taking pride in delivering quality and value for money. This additional income will also allow the BBC to undertake the second longer term strategy.
For the BBC to achieve their mission and their vision, they cannot simply focus their services in the UK-although they are a public purposes broadcaster they have much information, UK culture and politics that should be shared with the global audience, as well as the entertaining and factual creations. The BBC can also benefit financially from this, increasing their customer base and fees for services and programmes- especially taking advantage of the growth in the emerging markets such as BRIC where countries like India have less than 60% of households owning a TV whilst revenues per head in the market are increasing rapidly. This broadening of the BBC’s presence and income will allow them to develop more high quality productions, allocate more resources for investment in technology and research, and enable them to support the community projects and meet their public purposes more comprehensively.

8 Implementation
8.1 Strategy 1
Additional revenue streams through expansion of services e.g. iPlayer, adverts and pay per view.

8.1.1 Gantt Chart
A Gantt chart is a graph which demonstrates the schedule and the duration of the implementation of a project, taking into account tasks and resources that need to be completed.

This strategy will take duration of 12 months to implement. It will require market research and allocation of finance to which services need to expand more than others. Additionally existing staff can be trained to meet the requirements of job roles.

8.1.2 Risk Analysis

| Probability | Risk | Low | Medium | High | 1. Fierce competition with existing companies providing those services, no assurance of good results | | Has to face the strong competition against the existing player such as the windows media player, itv player and 40D, customer loyalty not assured. | | 2. Other companies may follow BBC’s strategy. If their services are more attractive and cheaper, this may detract consumer interest. | | BBC is slow in keeping up with viewers’ needs and technological change. This may therefore cause its services to not be attractive or competitive. | | 3.Adverts may detract viewer attention and lose the benefit of not having other companies advertised on BBC, this will mean BBC will have less air time to advertise their own shows | | Customers are more interested in the shows themselves, as long as the adverts do not increase advert time but simply replace a percentage of the BBC’s own adverts this will not be a huge hindrance. | | | 4. Increasing advertising costs, due to less air time of BBCs own adverts – due to replacement, will decrease the company’s financial competitiveness in R&D | | Since the government grants are decreasing, the advertising cost has to be treated with caution to ensure the income from other companies adverts are generating a large enough income compared to such costs | | 5. With the current recession organisations may cut back on their luxury (not integral) expenditures, thus purchasing less services from BBC. | | The economic recession will also affect other competitors and pay per view will not be significant and the product will be unique | |

8.1.3 HR & Finance Implications

HR implications for this strategy will be low. This is because the BBC’s staff team consists of employees that will be specially trained for advertising and staff that deal with financing who will need to forecast and calculate the revenues from advertisements and promotion. They also have a team of workers that look after the technological aspects of the organisation.

Financing of Strategy | Description of use of Finance | Level of Finance Required | Financing Methods | Strategy 1 | Adopting additional revenue streams requires investment for R&D and technological developments. | Medium | * Increasing levels of turnover and profit * Re-investment of revenue made from this strategy * Greater increase in license fee |

8.2 Strategy 2
Global expansion, especially focused on emerging markets, through expansion of foreign BBC services.

8.2.1 Gantt Chart

The above Gantt chart shows that this strategy will take 18 months to implement. It will require more market research than the short term strategy to select the most beneficial markets along with training new staff and constant evaluation to see if BBC’s brand name has been recognised in the market and if the organisation is performing well.

8.2.2 Risk Analysis

| Probability | Risk | Low | Medium | High | 1．Not familiar with the circumstance of new emerging markets | | BBC does not have an in-depth knowledge about the emerging markets. Such as the consumer taste, weak awareness of intellectual property rights, imperfect legal system, high levels of corruption, weak market infrastructure and a strong bureaucratic culture | | 2. Political risks---the instability of politics in emerging markets can be costly and dangerous | | BBC’s investment may have been against local government officials or forfeiture and BBC’s local partner may step down with the collapse of local government | | 3. The BBC may be seen as an outsider and predominantly western European in culture, as such the unbiased reputation may unjustly become at risk in the eyes of the emerging markets. | | BBC may be accused of “Local Protectionism” and subject to politics in recent years and its reports may seem less neutral. For example there was a huge objection against BBC’s reports in China in 2008 | | 4.aggressive competitors in emerging markets | | With the policy protection by local government, local competitors have more bargaining chips with BBC and BBC has to spend more to satisfy these competitors. | |

8.2.3 HR & Finance Implications
Creating business activities and establishing market share in international emerging markets will be challenging for the BBC as different countries will have different lifestyles and cultures compared to the UK. The BBC will need to take action to overcome this issue to ensure they can place their brand name within these markets and increase the levels of return and their market share. BBC will need to work with foreign media organisations as well as the government and HR will be a significant factor to ensure there is good communication between them. This can be through * Language training and cultural and lifestyle awareness training of current UK employees who can then be transferred to international countries to keep hiring costs to a minimum, however employees may have families therefore may not want to relocate. * Hiring employees from abroad as they will be aware of the culture, although costs for this will be significantly higher than the above because employees would need to be trained on how the whole of the BBC operates including technological developments, BBC iPlayer and radio, their cultures and values and many more factors. * Virtual/video communication strategies, these will be costly to implement but beneficial in the long term. The only issue will be that BBC may feel that face to face communication will be the most effective way of communicating with their international companies.

Financing of Strategy | Description of use of Finance | Level of Finance Required | Financing Methods | Strategy 2 | Expanding its services into international emerging markets requires high levels of investment for setting up the organisation, advertising and technology. | High | * Secure government funds from international countries as domestic grants have reduced * Additional international investment from third party investors * International subscription and license fees * Partnership or alliance with emerging international media company |

8.3 Stakeholder Mapping
BBC’s stakeholders would be affected by the proposed strategies therefore it is important to consider which stakeholders and how they would be affected through stakeholder mapping. The below matrix shows BBC’s key stakeholders whilst measuring their power against the level of interest they may hold in the organisation if when implementing the two proposed strategies.

Level of Interest | LOW | HIGH |

Power
LOW | 5
Minimal Effort | 4
2
6
Keep informed | HIGH | Keep satisfied | 3
1
Key players |
1

General public
2

Competitors
3

UK Government & Ofcom
4

BRIC/International Governments
5

Third party investors
6

BBC staff

Although all stakeholders would be affected in implementation, we can see from the above that the main key players would be the general public as they are BBC’s customers and the UK government as the funds the organisation are distributed by the government.

8.4 Managing the Change

Theoretical Implementation- Types of Strategic Change
After choosing the two most suitable strategies for BBC, it is important that the stakeholders of BBC understand the types of changes the strategies can bring. The diagram below shows the three levels of strategic change.

Managing strategic change;
Management activities involved in changing strategies are key, the key stages in this implementation have to be thought about to ensure management can overcome issues such as inertia and resistance to change. Below the key elements are set out and their role in implementation explained.

Diagnosis
The diagnosis stage is looking at the magnitude of the challenge we face in introducing strategic change.
Types of change
Balogun and Hope Hailey developed the view that there are four types of strategic change; see below. | Extent of Change | | Transformation | Realignment | Speed of Change | Incremental | Evolution | Adaptation | | Big Bang | Revolution | Reconstruction |

Taking the above models into consideration, the following can be derived from our strategies. Strategy 1 Additional revenue streams through expansion of services e.g. iPlayer, adverts and pay per view.
Type: Functional Level Strategy and an Evolution change.
This strategy can be implemented at functional level because BBC’s resources can be transferred between one business units to another to make additional revenue. The change would be evolution as it would be a gradual change in the future and will be proactive as it will create significant revenue.

Strategy 2
Penetration into international emerging markets through expansion of foreign BBC services
Type: Business Level Strategy and an Evolution change.
This strategy will exploit BBC’s resources and competences such as their brand name, technology developments and create competitive advantages within emerging international markets. It would also be considered as evolution change as BBC will need to emerge internationally in the future, which will also create considerable profits.

Context of change
How to manage the change in question depends on the context of such change. The BBC is a major corporation with certain long-established routines and structures that may impose resistance to change, this said the organisation is also very creative and tries to move with the times. The following must be considered when implementing these strategic changes.

1. Forcefield analysis
This analysis allows the forces that are likely to work for and against the change to be identified, having analysed the context of the change and the existing culture. This allows us to highlight which aspects would block change and decide how they may be overcome, and conversely how we may reinforce the factors helping to push change through. Here are some highlevel factors that may affect the BBC’s change.
Change Agents
The individuals involved in leading strategic change must think about the role that they have to play and the style of leadership that should be used in the context of certain change. This applies not only to strategic leaders at the top but also to middle managers, ordinary staff and even outsiders such as consultants. Style | Context | Benefits | Problems | Effectiveness? | Education | Group briefings assume internalisation of strategic logic and trust of top management | Overcomes lack of information and understanding | Time consuming, Direction & progress may be unclear or hard to measure | Good in incremental change or long term horizontal transformational change | Collaboration | Involvement in setting the strategy agenda and resolving issues in groups | Increases ownership of a decision or process, this may improve quality | Time consuming, outcome will be within existing paradigm | Good in incremental change or long term horizontal transformational change | Intervention | Change agent retains control & delegates elements of change | Process is guided and controlled but involvement takes place | Risk of perceived manipulation | Incremental or non-crisis transformational change | Direction | Use of authority to set direction and means of change | Clarity and speed | Risks lack of acceptance & ill conceived strategy | Transformational change | Coercion | Explicit use of power through edict | May be successful in crisis or state of confusion | Least successful unless in crisis, no understanding | Crisis, rapid transformational change, autocratic culture |

When the BBC is implementing strategy 1 and 2 they are using incremental and transformational strategies. The best styles to manage the change would be those in which the highly valued workforce is educated and involved so that the desire to promote the change is within the individuals as the objectives are understood and supported, therefore we recommend that education, collaboration and occasionally intervention are the most efficient styles to use in this context.
Levers for change
These levers are additional important factors that the change agents must take into consideration, deciding which levers to emphasise according to the context.
Of the two approaches to these levers of change, as suggested by Beer and Nohria, Theory O seems the best method of change for the BBC as it is based on the developments of organisational capability, with an emphasis on learning and participation in change programmes. That is not to say that Theory E; top-down ‘hard’ levers will not also have a part to play in certain stages.
In the case of the implementation of the chosen strategies the most important levers that need to be considered in the BBC’s context are; power & political processes and challenging the taken for granted. Due to strong ties to government and the longer term strategy not solely focusing on the UK – something that is currently taken for granted. Managing strategic change programmes
In this case the factors considered above will be combined to define how the management of this strategic change will go ahead. Although all the internal and individual analysis cannot be completed from our viewpoint it seems likely that it will be evolutionary strategic change that will need to be managed. This points towards the BBC as a ‘learning’ organisation that may continually develop- which is needed in the fast past technological environment- but also to react to differences in culture and changing economic and political conditions- especially when varying locally around the globe. The second key characteristic is the empowerment of the organisation that allows the staff from the bottom to the top to understand the aims of the vision and mission; in the BBC this is vital as it is the technically skilled staff that creates the content and products, not the management.

9 Strategy Monitoring
9.1 Balanced scorecard Scorecard component | Objective | Measure | Target | initiative | Customer perspective | -Increase programs produced service-Offer valuable service-Attain more bargaining power | -Observing viewing trends-Looking at comments on services offered - monitor supplier’s costs | -Increase customer loyalty by 20%-Achieve 16% personalized service - increase profits by 10% and reduce costs by 14% | -Marketing through emails, social networks and forums -Attain good customer relation-Can increase market share (international expansion) & make customers valuable to organization | Process | - creating international online delivery service -Continuous improvement-100% non defect products from suppliers | -measure online sales versus in TV viewing- -100% of products not faulty | - online viewing as 10% of overall viewing- s- increasing 85 % quality better than competitors | -reduces prices online-Merge with SCM partners- Increase programs if targets are achieved. | Financial | -Offer dividends to shareholders-- | -Analyze net earnings of company- | -Increase YTM to 7%- | -Increase investors by offering dividend | Innovation and employee development | -Employ Skilled workforce-Increase Market to BRIC countries-Start automation of shipping process | -Looking at educated workforce globally- monitor number of TV viewers-Monitoring shipping volumes | -Increase productivity & quality through training 20,000 staffs every ½ a yr-Achieve greater economies of scale and increase market share by 14%- | -Look for skilled workforce & continuously improve process-reducing the rate of unemployment in these world countries- |

10 Conclusion

Within this current climate, new markets are emerging and growing, technology is rapidly changing and competitors are increasing therefore the BBC need to ensure that they take advantage of strategies that manage and adapt to this change.
This report has analysed the internal and external environments that BBC operates in and from the several strategies we have developed, we have found that the BBC needs to implement a short term strategy and a long term strategy. Expanding their potential revenue streams and penetrating into BRIC and other emerging international markets are the most feasible, suitable and acceptable strategic options as they will increase the BBC’s income distribution, competitive advantage and reputation.
Managing and implementing strategies in a changing environment can be challenging but the BBC will have the prospects to exploit their resources and competences domestically and internationally. They have the opportunity to develop a new customer base and increase market share thus developing the above strategies will be of advantage to the organisation. If the BBC fails to implement, they could lose out on needed income that competitors may acquire and fall behind on technology as competitors may get ahead of them and see the gaps within the industry.

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